I'm new to BP and REI. There is loads of great information here.
So I’m just starting out my research and would like to start putting in offers March/April next yearbook the right property.
I’m currently in Vancouver, Canada and own a 1 bed condo it’s currently worth at least $30k more that what we paid for it 2 years ago.
When we bought this property we had no down payment and had $20k in a car loan. We had to borrow $20k in the form of a line of credit. We were debt free in just under 18 months.
I am thinking to go down the same route to get started with our first investment property. We are currently pre approved for a mortgage. And we would be borrowing on a line of credit $50/60k.
What are your thoughts?
A Man has to do what a Man has to do.
That decision is really up to you.
I think its possible it just may affect your debt to income ratio. Other than that it's definitely do-able and have seen a few cases where some have done it. I would confirm with your lender if you can do that, some banks have rules against that.
@James Smyth , well congrats on reaping some benefit of appreciation; the tide raises all boats.
That being said, please keep in mind that leverage is a two-edged sword. When things are going great, it magnifies your gains. But when things go sideways, well, it compounds the losses.
Perhaps start to investigate some other forms of financing that don't rely on your own ability to borrow /generate 100% of financing with you totally on the line.
@Mel Anic our current debt to income ratio is less than 20% which would climb to about 35/45% with not taking in to account for any income that would be generated by rent.
@Marc Winter I know that’s why we paid the last bit of debt of as fast as we could.
What other ways could we generate that money? I know we could pull some of equity out of condo. That was my plan in a few years when we move out east.
@James Smyth Is your line of credit a heloc?
It’s not it’s just a normal Loc. We plan to sell the condo in the next 2 years. I would like to keep the equity in the condo until then. At which point I want to use the equity to buy a home for us and a rental unit.
A heloc (a secured loc) is one of the most under-utilized financial tool that homeowners forget to tap into. An unsecured loc carries a higher interest rate than a heloc which could hurt your debt servicing ratios.
I hadn't really thought about the lower interest rate. That's definitely ill look in to.
@James Smyth congratulations on your first deal working out well. However not all deals go smoothly or as expected. Borrowing more to purchase investment property increases your risk, but it can also increase your return. Generally borrowing to the max if you do not also have cash reserves is a very risky move.
How about saving money for the down payment? If you were able to pay off the LOC you can save for a DP and it will be much safer than 100% financing
I know we got lucky we bought just before the market reached its high point. I’m not expecting that type of return on any investment property this will be a long term hold and rent.
Plan on having enough cash on hand pay expenses for 6 months.
I have thought about this but my only concern is that it will put off buying for a year and a half.
This may sound weird but I’ve always found it easier to pay of debt that to save.
You really want to 100% finance it ? I do this a lot myself but I know and accept the risk plus it’s on cheap houses 10k or less . I imagine this is a ginormous mortgage your on the hook for ? I personally wouldn’t do that for anything over say 50k
That was my plan but the more I read this comments I’m starting to think otherwise. The mortgage would probably be around $250/300k
As a seasoned investor in Vancouver, BC, I'd keep the condo, refinance it with a HELOC and use the HELOC to access more funds to buy the first investment property. This method is cost-effective because the investment property would be a full tax write-off (including land tax) along with the HELOC interest.
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